Swedish companies must learn to adapt to the strong krona and find other ways of staying competitive because policy makers aren’t planning to interfere with the exchange rate, Prime Minister Fredrik Reinfeldt said.
“We must get used to, over time, that we have a stronger currency and rather do other things -- we’re lowering the corporate tax, we focus much on research, development and innovation,” Reinfeldt said to reporters in Riga today.
Sweden has refrained from joining a global push to weaken currencies in a bid to prop up exports and foster economic growth. The krona is the best performing major currency in the world, rising 3.54 percent this year against 10 developed markets, Bloomberg Correlation-Weighted indexes show.
The government and central bank have made clear they won’t interfere with the ascent. Riksbank Governor Stefan Ingves said in an interview last month he’s “happy” with the current level. The central bank left its main rate at 1 percent last month and signaled borrowing costs probably will stay at that level amid “positive” signs of a recovery.
The bank last month predicted the economy, home to truckmaker Volvo AB and retailer Hennes & Mauritz AB, will expand 1.2 percent this year, after growing 0.9 percent last year. Growth will pick up to 2.7 percent next year. The euro area may contract 0.3 percent this year, the European Commission forecast on Feb. 22.
“There is a discussion around the world right now again about different currencies’ value against each other but the more this is market-based, the better, in my view,” Reinfeldt said. “Otherwise we’ll be back in a world where you try to steer the currencies’ value against each other and our Swedish and European experience is that that doesn’t turn out that well.”
The krona gained 0.1 percent against the euro to trade at 8.4395 as of 3:15 p.m. in Stockholm.